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On The Hill
Telecom Bill Faces Tough Hurdle Under Democrats
by David Hatch
Pending deregulatory telecommunications legislation faces new hurdles now that Democrats have won the House and are close to gaining control of the Senate, industry observers said.
The Senate Commerce Committee approved a bill authored by Chairman Ted Stevens, R-Alaska, in June. But it subsequently stalled amidst controversy over provisions that critics consider too weak to prevent telecom and cable companies from dominating their high-speed Internet lines.
On Wednesday, AP projected that Republican Sen. Conrad Burns of Montana has been narrowly defeated by Democrat Jon Tester. If Democrats prevail in the Virginia Senate race, which at deadline was too close to call, the party would control the chamber next year.
Relinquishing the Senate could further dim prospects for Stevens' legislation during a lame-duck session of Congress set to begin Nov. 13.
Heightening the election drama, both Burns and Republican George Allen of Virginia are Senate Commerce Committee members and strong supporters of Stevens' bill.
"With the House changing, the Senate Democrats will keep anything from happening other than that which is necessary for the continuity of government," a former Democratic Hill staffer said. "I don't think anybody is putting high odds on [telecom] action this year," added a telecom industry source, with another source even blunter: 'That bill's dead."
In analysis issued late Tuesday, the investment firm Stifel Nicolaus predicted that the Democratic takeover of the House and possibly the Senate would not result in major communications policy changes. Instead, the firm anticipates that any telecom or media legislation enacted by Congress would be "modest in scope."
"Today's change in the makeup of Congress should change nothing in the debate over regulating the Internet through so-called net neutrality mandates," the industry group Hands Off the Internet said in a statement. The organization, whose members include AT&T and BellSouth, opposes tough Internet regulation.
Despite the odds, there continues to be speculation that Stevens will try to move at least portions of his bill during the post-election session to salvage part of his legislation after months of debate, drafts, hearings and committee action. A spokesman for Stevens did not return calls.
The veteran lawmaker, who is president pro tempore of the Senate and former Appropriations Committee chairman, is an expert at parliamentary procedure. He commands grudging respect from even his fiercest critics, who concede that he should never be underestimated or discounted.
Earlier this year, the House passed a deregulatory telecom bill spearheaded by outgoing Energy and Commerce Committee Chairman Joe Barton, R-Texas.
One source suggested that Republican FCC Chairman Kevin Martin might be strengthened by the election results because industry players would seek relief from the agency instead of Congress.
"He's going to be the only source of relief now," the source said, adding that while companies could theoretically get telecom legislation passed in Democratic-controlled chambers, "the price is way too high."
But others predicted that the Democrats would ratchet up FCC oversight, which in turn could impact Martin's agenda.
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On The Hill
Telecom Reform, Merger Are On Rep. Dingell's Radar
by David Hatch
House Democrats will pursue a fresh telecommunications overhaul next year, incoming Energy and Commerce Committee Chairman John Dingell said Wednesday. The panel also will ask the FCC to delay consideration of the AT&T, BellSouth merger until 2007 so it can oversee deliberations on the transaction.
"Clearly we've got to do something" about the pending telecom bills in Congress, the 80-year-old Michigan Democrat told reporters during a Wednesday conference call. "I think we're going to try and do that again in a responsible way," he said of efforts to enact legislation.
Dingell, who headed the panel from 1981 until Democrats lost control of the House in 1995, said there are "major problems" with the 1996 Telecommunications Act. That law is considered outdated for today's Internet- and wireless-driven world. But he opposed a deregulatory measure authored by Republicans and passed by the House earlier this year.
Dingell said the committee further plans to examine television "indecency" and reform of the universal service fund, which subsidizes telecom costs in rural and underprivileged areas. The panel also will explore Internet regulations opposed by telecom and cable giants.
While Verizon Communications and other companies have said they will not seek telecom legislation next year, Dingell noted that he has been "very, very helpful" to telephone companies and would ensure that their needs, and the public's, are served. The congressman said it is unclear whether video-franchising relief, which the Bells support but he opposes, would be part of his agenda.
Furthermore, the committee will take a "hard look" at how the FCC apportions spectrum for emergency responders. Dingell wants to ensure that states and localities have the equipment, spectrum and money to improve communications across jurisdictions.
Regarding the AT&T, BellSouth transaction, valued at about $80 billion, Dingell said the transaction will face close scrutiny. "We will have to look to see whether the Department of Justice is doing its responsibility," he said. The department approved the merger with no conditions on the new company.
Energy and Commerce also plans to examine whether the FCC is serving the public interest with its proposed merger restrictions, he said. The FCC has delayed three votes because regulators have been unable to reach agreement. Asked whether the FCC should delay its vote until next year, Dingell said, "I think it would be in their interest."
Regarding the agency's court-ordered review of media-ownership rules, Dingell did not say whether he would intervene. But he noted with disdain that the Energy and Commerce panel under Republicans "has been very responsive to industry desires to reduce or eliminate controls on ownership."
He said Democrats would seek to maintain "diversity and localism" and try to determine whether further relaxation of the rules is justified. Locally originated news, he complained, is not being provided in some markets.
Dingell said he does not know whether fellow Democrat Edward Markey of Massachusetts plans to head the panel's Telecommunications and the Internet Subcommittee. "Mr. Markey is a very valuable member of the committee. He is a close friend," Dingell said.
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On The Hill
Election Reshuffles Committee Chairmanships
by David Hatch and Winter Casey
The election results have reshuffled key committee chairmanships in the House and could alter them in the Senate.
As Democrats on Tuesday recaptured control of the House, many leadership changes are expected in that chamber.
John Dingell of Michigan, the lead Democrat on the House Energy and Commerce Committee, will run the panel in 2007. The lawmaker told reporters Wednesday that he will dramatically change course from the GOP agenda. (See related story) He will replace Rep. Joe Barton, R-Texas, who authored deregulatory telecom legislation that the House passed earlier this year.
The new chairman of the panel's Telecommunications and the Internet Subcommittee remains unclear. Rep. Edward Markey of Massachusetts, the current top Democrat on the subcommittee, could run the panel, head the Resources Committee or chair another Commerce subcommittee.
If Markey does not replace Fred Upton, R-Mich., as telecom subcommittee chairman, Rick Boucher, D-Va., would be tapped, sources said. Boucher is considered more supportive of the Bell telecom companies than Markey, though Boucher has opposed the Bells on some issues.
Sources said a full committee chairmanship might be appealing to Markey because he would have considerable authority and a large staff. But the longtime congressman is an outspoken expert on communications matters and the subcommittee has a high profile. At the end of the day, an industry source observed, "telecom is what gets [Markey] out of bed in the morning."
Barney Frank, a fellow Massachusetts Democrat to Markey, is expected to chair the Financial Services Committee. In the past, Frank has opposed banning Internet gambling -- and idea just signed into law weeks ago -- and worked to combat data breaches. He is a member of the Congressional Internet Caucus.
With Republican Chairman Michael Oxley of Ohio retiring and the defeat of Rep. James Leach, R-Iowa, Louisiana Republican Richard Baker is in line to become the ranking Republican on Financial Services.
In the Senate, meanwhile, Patrick Leahy of Vermont is poised to become chairman of the Judiciary Committee if Democrats take control. Power hinges on the outcome of the Virginia Senate race, which was too close to call Wednesday.
Though there are a couple of more senior members than Leahy on the committee, they are expected to take leadership roles on other panels, according to a staffer. The legislative aide said Leahy plans to focus on strengthening the Freedom of Information Act, supporting patent reform and protecting data privacy, among other issues.
If the Senate does flip, Democrat Herb Kohl of Wisconsin is expected to chair Judiciary's Antitrust Subcommittee, where he likely would focus on telecom and merger reviews, among other issues, according to a Senate staffer.
Additionally, if Democrats win the upper chamber, Daniel Inouye of Hawaii, the lead Democrat on Senate Commerce, likely would replace panel Chairman Ted Stevens, R-Alaska.
Sources noted, however, that if Robert Byrd, D-W.Va., does not become Appropriations Committee chairman, Inouye probably would head that panel, paving the way for Sen. John (Jay) Rockefeller, D-W.Va., to run the Commerce Committee. Either way, the Democratic chairman of Senate Commerce would be more regulatory than Stevens.
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Lobbying
Tech Industry Is Anxious For Action On Agenda
by Heather Greenfield
While the Democratic takeover of the House and possibly the Senate is big news, technology industry officials said the power shift is not as likely to impact what tech legislation moves as much as just having the election over.
The hope is that with the heat of the election, some of the issues that have mostly bipartisan support part can be addressed. "We're glad the elections are over," said Andrea Hoffman, the vice president of TechNet. "There are some critical items we really need passed."
Bill Archey, president and CEO of the tech group AeA, said the innovation agenda always has been bipartisan and is one AeA has worked on with likely House Speaker Nancy Pelosi, D-Calif. "We expect under the Democrats that our voice will be heard, and we will be given a fair hearing on the challenges facing high-tech in the next few years," Archey said.
Those voices -- including AeA, the Consumer Electronics Association, the Computing Technology Industry Association, the Electronic Industries Association, the Information Technology Industry Council, the Northern Virginia Technology Council and TechNet -- all support the innovation and competitiveness issues advanced by both Pelosi and President Bush.
That agenda calls for extending the research and development tax credit, increasing H-1B visas for highly skilled foreign workers, improving mathematics and science education, and increasing funding for basic scientific research.
To that list, Roger Cochetti, CompTIA's director of U.S. public policy, added updating intellectual property laws and "reforming antiquated telecommunications regulations." Patent reform also is on the industry wish list, as are pro-trade initiatives.
While some have expressed concern that Democrats are not as strong on trade issues, EIA President Dave McCurdy, a former Democratic congressman, said likely Ways and Means Committee Chairman Charles Rangel, D-NY, is pro-trade. But McCurdy also said it will be necessary for the White House to consult with Democrats and "reach out and build a bridge" to get trade deals approved.
Senate control is still undetermined, as the outcome of the Virginia race remains undecided. But no matter what happens, the Senate will be held by a razor-thin margin and Republicans still control the White House.
Rep. Tom Davis, R-Va., who briefly attended a CEA Election Night party, said that even if the House can move legislation, it can easily stall in the Senate because of different rules that allow one senator to block legislation and require 60 votes to unlock it.
Information Technology Industry Council lobbyist Ralph Hellman, however, said divided government is something the tech industry may be able to work with better than other groups.
Hellman said the divided government from 1995-2001 -- when the GOP held Congress and a Democrat was in the White House -- was "the single-most productive time to advance the tech agenda." He cited permanent normal trade relations with China, an agreement that left zero tariffs on IT products, a moratorium on Internet taxes, e-signatures legislation that spurred e-commerce, and a significant increase in H-1B visa levels as developments then.
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On The Hill
Tech Leaders Look To Pelosi's Innovation Agenda
by Heather Greenfield
Nancy Pelosi, the likely House Speaker when Democrats assume control of the chamber in the 110th Congress, is from San Francisco and released an innovation agenda even before President Bush did. Technology industry representatives hope that means Pelosi understands what is needed to maintain innovation as an economic driver.
"We think it's great," said Information Technology Industry Council lobbyist Josh Ackil, who used to work for former House Minority Leader Richard Gephardt, D-Mo., and ex-Senate Minority Leader Thomas Daschle, D-S.D. "She led the charge with the innovation agenda."
Ackil added, "We're excited to work with Pelosi because a lot of our issues didn't make it across the finish line this Congress."
Pelosi's innovation plan calls for more H-1B visas for skilled foreign workers, "modernizing" and permanently extending the research and development tax credit, enacting energy policies to boost competitiveness, improving education, increasing basic research funding, and reforming the patent system.
Aside from basic research funding, none of those issues has made it through this Congress yet, despite legislation, hearings and bipartisan support for most of them.
Patent reform is seen as one area that could make more progress with Democratic leaders. The tech industry and pharmaceutical industry have been on opposite sides of that debate.
"Pelosi would help to an extent," said Andrea Hoffman, vice president of TechNet. "It's our strong hope to see some strong patent reform early in 2007."
"She's shown an interest in tech issues," Michael Petricone, the vice president of government affairs for the Consumer Electronics Association, said of Pelosi. "We have every reason to believe she will be a big tech supporter."
Bobbie Kilberg, president and CEO of the Northern Virginia Technology Council, which represents 1,100 tech companies, said much will depend on how Pelosi chooses to lead. "If she promotes a very left-of-center agenda, you're going to have a business community that's very concerned," Kilberg said.
Ackil agreed that Pelosi's success, and the success of the tech agenda, depends on how she leads. He added that Pelosi has indicated she plans to work in a bipartisan way.
In a news conference Wednesday afternoon, Pelosi promised to be "the Speaker of the House -- not just the Democrats."
"Republicans' inability to reach across the aisle and work in a bipartisan fashion ultimately disabled their ability to move things across the finish line, and we hope Speaker Pelosi doesn't make the same mistake," Ackil said.
During her 20 years in the House, she has served on the Appropriations Committee and spent 10 years on the House Intelligence Committee, including a two-year stint as ranking Democrat. She also chaired the Congressional Working Group on China and led congressional reviews of the Sept. 11, 2001, terrorist attacks.
"We're hopeful that Speaker Pelosi and President Bush will join forces on the innovation agenda," ITI lobbyist Ralph Hellman said, adding that both made the issue a priority last year.
Rep. Jack Kingston, R-Ga., said Republicans will have to "get over the shell shock of last night and then start talking to each other" about who will be the new minority leaders in the House.
"I think there will be new leadership," Kingston said, but he declined to endorse anyone, including Rep. Mike Pence, R-Ind., whose name has been circulating for the top post.
Bush talked with Pelosi by phone Wednesday morning.
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Civil Liberties
Democratic Victory May Kill Surveillance Bills
by Andrew Noyes
The new Democratic-led House could bode well for the civil-liberties crowd. The most pressing issue for the 110th Congress will be quashing efforts they say would allow the continuation of an eavesdropping program authorized by President Bush after the Sept. 11, 2001, terrorist attacks.
Caroline Fredrickson, director of the Washington office for the American Civil Liberties Union, said the shift in leadership may mean "a very profound change" in how lawmakers address the electronic wiretapping initiative of the National Security Agency.
Before recessing for the mid-term election, the House passed a bill, H.R. 5825, to overhaul rules for wiretaps without warrants. The Senate companion measure, S. 2453, did not get a floor vote.
Bush pushed hard in the run-up to the election for Congress to codify the program, Fredrickson said. "I think that is dead."
The House now can move ahead with "what it should have been doing right from the beginning," she said, which is figuring out the broadness of the program's scope, how many Americans have been spied on and what has been done with the information.
Lawmakers first must return for a short, post-election session, which she said could be "rife with danger." "It provides the greatest opportunity for late-night maneuvers," she said, adding that the ACLU will be vigilant in "scrubbing" any bills that pass.
Leslie Harris, executive director of the Center for Democracy and Technology, said her group will look to the new Congress to "be more skeptical of the president's claims that it's necessary to sacrifice civil liberties for national security."
Before House Intelligence or Judiciary committees take action on NSA spying or similar proposals that arise, she said she hopes they will "engage in the kind of vigorous oversight, investigation and fact-finding that really has been absent in the last four years."
There will probably not be "dramatic rollbacks of national-security-related legislation," like the controversial sections of the USA PATRIOT Act that were reinstated by the 109th Congress, Harris said. One provision involves a special subpoena power that lets the FBI scour library and Internet provider files without search warrants.
George Washington University law professor Jonathan Turley said he looks to the new House to exercise meaningful "oversight after a long and dangerous hiatus." Given the "largely comatose" status of the current Congress, a "great deal of improper or potentially criminal conduct" could have been ignored, he said.
The question of whether Democrats will fight hard on issues like torture and criminal rights for detainees also was on the minds of civil-liberties advocates. Fredrickson said the party will be "pretty cautious" with an eye toward winning the 2008 presidential election, and Turley agreed.
The party may be calculating "how they can avoid doing anything that's controversial," Fredrickson said, which would be "a real shame" because voters asked for change. "They don't want just a passive Democratic Party," she said.
Lisa Graves, deputy director for the Center for National Security Studies, said missteps that have been taken by the Joint Terrorism Task Force, a partnership between the FBI and local law enforcement agencies aimed at tackling terrorism, also must be examined. In particular, she cited reports revealed through Freedom of Information Act requests that the task force has spied on Americans who oppose the Iraq war and other administration policies.
One proposal offered this year would halt funding for the NSA's warrantless wiretapping and "help restore the rule of law," Graves said.
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Campaigns
Observers Say Gridlock Can Be Good For Business
by Winter Casey
Despite some reports that the potential gridlock created by split-party control of the federal government could be good for the economy, observers worry that some legislation of interest to the technology sector could be hampered by a Democratic-controlled House.
Democrats recaptured control of the House on Tuesday and could control the Senate as well when all votes are counted. The business and technology communities now must grapple with how to achieve their goals in the 110th Congress.
Some observers said gridlock means legislation is less likely to be passed, which could benefit the economy. "If there's one thing Wall Street likes, it's when politicians do nothing but harass interns, drink Chivas by the gallon and vote on legislation that'll never see the light of day," Ray Hennessey, the editor of SmartMoney.com, wrote Wednesday.
James Angel, a finance professor at Georgetown University's business school, said he does not anticipate passage of any major initiatives or reforms -- such as tax policy -- in the next two years the next Congress is likely to make only "minor, incremental changes," he said.
Angel said that a more Democratic-leaning Congress may be more likely to increase the number of H-1B visas for skilled foreign workers, but the issue also "may well get caught up in the gridlock."
Democrats are less likely than Republicans to address litigation reform and frivolous shareholder suits, he said. And "getting any major trade deals through" in the next couple years will be "difficult," Angel added.
Robert Johnson, a managing director of the CFA Institute, a nonprofit association for investment professionals, said "the stock market has performed much better under political harmony than under political gridlock for the past 14 political elections," regardless of "who controls the presidency."
Many major news outlets, including AP, Bloomberg News, the Financial Times and Reuters, ran stories Tuesday touting the benefits for the business community of gridlock. But Carol Cassel, a professor at the University of Alabama, said that in the past, "divided government has not produced less legislative output."
"A united government is somewhat of a myth," she said. For example, in the last couple of years, the United States has had a Republican Congress and president, but lawmakers have not voted in unity or passed more significant legislation.
"If you look at the sheer number of major laws that are passed, without regard to whether they are liberal or conservative, it has been found that divided government does not make a difference," added Steve Borrelli, a political science professor at the university.
He added, however, that "it is true that more legislation gets proposed during divided government" and "a smaller amount of proposed laws get passed."
Under divided governments, it is more difficult to address immediate crises, but budget deficits do not get any worse, Borrelli said. He also noted that a little gridlock is positive because the business and technology communities prefer a stable tax code.
Mark Nebergall, president of the Software Finance and Tax Executives Council, said changes to the tax code are needed, particularly in the international area, which would help the high-tech sector. Gridlock "would only delay those much needed changes," he said.
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States
Democrats Score Gains In Legislatures, State Offices
by Michael Martinez
Capitol Hill was not the only place where Republicans lost ground Tuesday. Democrats surged to take control of state legislatures throughout the country and now are poised to control the majority of state governments, as well as the U.S. House and possibly the U.S. Senate.
According to the National Conference of State Legislatures, results available as of noon Wednesday indicated that Democrats have taken control of both chambers in 23 legislatures. Republicans, who claimed both chambers in 20 legislatures before Tuesday, now only control 16. Legislatures in 10 states will be split, while Nebraska's unicameral legislature is nonpartisan.
Iowa, Indiana, Minnesota, Mississippi, New Hampshire, Oregon and Wisconsin were among the states where power shifted. Power shifted to Republicans in one chamber, Montana's House.
"The voters expressed a real desire for change, and all in one direction," NCSL's Tim Storey said in a statement. "The Democrats have put some light between the two parties. This isn't parity anymore."
Democrats will have more influence in the administration of elections in several states as well. They captured victories in secretary of state races in Iowa, Minnesota, Ohio, New Mexico and Nevada. All of the races were targeted by the Secretary of State Project, an online fundraising initiative that funneled cash to Democratic candidates.
The project raised more than $167,000 for Jennifer Brunner, the Democrat in Ohio who will replace outgoing Republican Secretary of State Kenneth Blackwell.
Earlier this week on The Huffington Post, a Democratic Web log, Democratic campaign strategist Cliff Schecter said it was imperative that Blackwell, who was defeated by Democrat Ted Strickland Tuesday in Ohio's gubernatorial race, be replaced with someone who could be trusted to manage the state's election system.
He questioned the leadership of Blackwell and former Florida Secretary of State Katherine Harris in past presidential elections where their states were key battlegrounds. Harris lost in a rout Tuesday in her senatorial race against Democratic incumbent Bill Nelson.
"We must never have the Blackwells and [Harrises], people actually crazier than an Edgar Allan Poe character, running our electoral machinery again," he said. "What happens in Ohio will affect the entire country, as perhaps the most important swing state."
California Secretary of State Bruce McPherson, a Republican who has been particularly active on the e-voting front, was in a dead heat with Democratic state Sen. Debra Bowen, according to early results. The San Francisco Chronicle reported that Bowen was leading by less than a point with more than two-thirds of precincts reporting.
A few familiar Democratic names also scored victories in attorneys general races.
Oakland Mayor and former California Gov. Jerry Brown, a three-time presidential candidate, easily defeated GOP state Sen. Chuck Poochigian to become the state's next top cop. The late Chicago Tribune columnist Mike Royko nicknamed Brown "Governor Moonbeam" during the 1970s after the Democrat championed a proposal for the state to launch its own communications satellite.
In Delaware, Beau Biden, the son of Democratic Sen. Joseph Biden, defeated Chief Deputy Attorney General Ferris Wharton by about five points. And former Housing and Urban Affairs Secretary Andrew Cuomo, the son of former New York Gov. Mario Cuomo, sailed to victory in his New York attorney general's race against Republican Jeanine Pirro.
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E-Government
Machines May Complicate Recounts In Tight Races
by Michael Martinez
Recounts are possible in several tight congressional races, but the electronic machines used during several of contests might make it more difficult to validate ballot counts.
In Virginia, the site of a razor-thin race between Republican Sen. George Allen and Democrat James Webb, some voters cast ballots Tuesday on touch-screen machines that do not leave paper trails. Civil libertarians said the absence of paper records could complicate a probable recount.
"Computers are really good at telling you the same things that are stored in their memories," said Cindy Cohn, the legal director of the Electronic Frontier Foundation. "The recount in Virginia will be more of a reprint than anything else."
Should Sen. Conrad Burns, R-Mont., who lost his seat Tuesday to Democrat Jon Tester, request a recount, things might go more smoothly there because the state runs on an optical-scan system.
Accounts of e-voting glitches in multiple states streamed onto Web logs throughout Tuesday, and a collection of civil-rights groups said they were contacted by thousands of voters with complaints about e-voting machines.
The Election Protection coalition reported trouble in Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Missouri, Minnesota, New Jersey, Ohio, Pennsylvania, Tennessee, Utah, Washington and Wisconsin.
The group documented a disproportionate amount of e-voting problems in Ohio, a state many experts predicted would be chaotic. According to the coalition, 43 of Cuyahoga County's voting precincts either failed to open on time or to activate all of their Diebold touch-screen machines.
Democrats successfully sued to keep polling places there open for an extra hour-and-a-half as a result of the early disruptions. Election officials in seven other states also were forced to keep polls open for extended hours to accommodate long lines caused by e-voting glitches.
The liberal organization MoveOn.org went fishing for e-voting trouble and offered a $250,000 reward to anyone who could provide concrete evidence of voter suppression or e-voting fraud. MoveOn did not provide comment Wednesday as to whether the reward evoked any leads of criminal activity.
Some bloggers said they hoped Tuesday's problems would prompt election officials at all levels of government to reconsider e-voting security, particularly for touch screens that lack paper trails.
At Daily Kos, Markos Moulitsas Zuniga said the fact that so many people from both parties are complaining about e-voting demonstrates the nation's need for better election systems. He advocated a solution that borrows from Oregon's vote-by-mail system.
Avi Rubin, a computer science professor at Johns Hopkins University who documented his experience at a polling place in Maryland on his blog, said that even though voting in his state when relatively smoothly, he still favors a paper-based system.
He called for a nonpartisan effort to build "systems that can be independently audited, that are not too vulnerable to failures and human error, and that are completely transparent to voters."
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E-Commerce
Today's Shopping Choices: 'Paper, Plastic Or Electrons'
by Andrew Noyes
Changes in payment devices and systems have led to new challenges and opportunities in the high-tech sector, speakers said Wednesday on the final day of an FTC meeting focused on developments that will shape consumer experiences over the next decade.
"Consumers really do have a choice of paper, plastic or electrons," Jeanne Hogarth, the program manager for consumer education and research at the Federal Reserve Board, said in noting that disparities exist in the e-payment industry.
People who do not use electronic methods are mainly low income, elderly and less educated, while the "mega-users are the opposite," she said, adding that the technology gap between the "haves and have-nots" is narrowing.
There are "pluses and minuses" to new payment methods, Hogarth said. "I see the real advantage in helping people improve their financial management," but she called attention to "the dark side" as well, like fraud and identity theft.
Jean Ann Fox of the Consumer Federation of America said people "need to have confidence in the payment mechanisms they use," whether there are traditional or cutting-edge systems. Historically, consumer-protection laws have successfully played that role.
She noted an "explosion" in different types of e-payment technologies available, "but consumer-protection laws haven't kept up." "You have one set of rights if you use your credit card, another set of rights if you use your debit card." There is no federal protection for stored-value cards or gifts cards, she said.
That is especially worrisome for cards that are increasingly popular among low-income consumers, Fox said. According to Hogarth, two-thirds of American adults purchased or received gift cards in 2005 and 90 percent used "some sort of plastic," up from 78 percent in 2000.
"We need to harmonize consumer protections so they apply to all forms of payment mechanisms," Fox said. That includes liability limits on cards, recourse for malfunctioning cards, a uniform dispute-resolution process and streamlined billing standards across industries, she said.
Paul Tomasofsky, president of Two Sparrows Consulting, looked at the e-payment issue from a "compelling business case." A number of payment business models over the last 15 years were unsuccessful, he said. A winning model takes into account the fact that "consumers [are] demanding more convenience" and safeguards against fraud.
"Consumers are starting to wonder, 'Is it safe to use my credit card?'" Tomasofsky said. Some consumers have gone as far as setting up a credit-card account specifically for Internet transactions, he said. "They want to put a human firewall around what happens there."
Also at the FTC event, executives from Black Lab Mobile, Microsoft and Visa spoke about new payment methods and a panel of ID protection experts discussed third-party billing, fraud-scoring and other possible solutions.
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Today's Feature:
International Roundup
For those who live in Britain, a new report commissioned by the information commissioner's office warns that "Big Brother" is watching.
Every Wednesday, read the International Roundup by Winter Casey
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